SCHEDULE 14A
SCHEDULE 14 INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ X ]
Check the appropriate box:
[X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Name of Registrant as Specified in Its Charter:
Price/Costco, Inc.
Name of Person(s) Filing Proxy Statement:
Price/Costco Shareholders Committee
Payment of Filing Fee (check the appropriate box)
[X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j) (2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
____________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_____________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (1)
_____________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________
(1) Set forth the amount on which the filing fee is calculated
and state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount previously paid:
____________________________
2) Form, Schedule or Registration Statement No:
______________________________
3) Filing Party: _________________________
Date Filed: _______________________________
<PAGE>
Price/Costco Shareholders Committee
c/o Teamsters Local 542
4666 Mission Gorge Place
San Diego CA 92120
Tel. (619) 582-0542
Fax (619) 582-0059
PRELIMINARY PROXY STATEMENT
INDEPENDENT SHAREHOLDER SOLICITATION
AGAINST BOARD NOMINEE GALANTI AND FOR SHAREHOLDER PROPOSAL ON
INSIDER TRADING
at
ANNUAL STOCKHOLDERS MEETING of
PRICE/COSTCO, INC.
January 29, 1996
Double Tree Resort, 5401 N. Scottsdale Rd.
Scottsdale AZ 7:30pm
Date sent to shareholders:
January 4, 1996
Dear Price/Costco Shareholder:
In the board of directors election, we urge you NOT to vote
for nominee Richard Galanti. In 1995 Galanti entered into a consent
decree in an SEC insider stock trading lawsuit against him.
We urge you to vote FOR the shareholder proposal that the
board not nominate anyone in the future found guilty of insider
trading or bound by a consent decree concerning insider trading.
1. SHAREHOLDER PROPOSAL FOR ZERO TOLERANCE FOR INSIDER TRADING
Please vote FOR the following recommendation concerning future
elections:
RESOLVED, that shareholders recommend the Board adopt a policy
for future board elections of "zero tolerance" for insider
trading, under which the board will not nominate anyone for
election as director who has been convicted of insider trading
or entered into a consent decree with respect to insider
trading.
For good reasons, it is illegal for a person who possesses material
nonpublic information about a public company to buy or sell the
company's stock. Insider trading activity violates a fundamental
principle of a free market: that everyone in the market have equal
access to information. Insider trading allows a person with
special access to information to fleece other investors, by selling
stock in advance of a public disclosure likely to depress the
price, or buying it before other investors have information which
will tend to increase the price.
A person who would act this way cannot be given a position of
trust. It does not matter whether the insider trading occurred in
the stock of this company or another, any more than Price/Costco
should hire someone who embezzled from a previous employer.
In 1995, Price/Costco Chief Financial Officer Galanti
consented to entry of a final judgment against him in an action
brought by the SEC alleging that he engaged in illegal insider
trading in the stock of Office Club, Inc. He was permanently
enjoined from violating federal laws against insider trading. He
agreed to disgorge $26,875 in insider profits, to pay a civil
penalty of $26,875, and to pay interest of $10,658.
The SEC complaint alleged that in 1990, while in possession of
material non-public information about an impending merger
transaction involving Office Club and Office Depot, Galanti
purchased 5,000 shares of Office Club stock. Office Depot is no
stranger to Costco. Carrefour was the dominant stockholder in both
Office Depot and Costco until this year, when it divested its Price
Costco stock. Carrefour described Office Depot and Costco as its
two United States allied companies. At the time of the alleged
insider trading, Office Depot and Costco shared a director, Denis
Defforey, then Carrefour's CEO. At the time the trading occurred,
Galanti was the chief financial officer of Costco.
Management is conspicuously silent in its proxy statement as
to whether Galanti actually did what the SEC accused him of.
Management is equally silent about whether it has taken any actions
to alter his access to inside information or to discipline him.
Shareholders need to forcefully advise management this is
unacceptable.
Management's argument against this proposal is that a consent
decree should not be treated the same way as a conviction, and
seems to imply Galanti was innocent but entered into the decree to
avoid legal expenses.
In our view the SEC generally conducts a thorough
investigation before it files an insider trading lawsuit. We feel
shareholders can trust the SEC more than they can trust this board
of directors to punish one of its own. Consent decrees often get
entered when the evidence of illegality is so clear that the
defendant wisely decides to "cut a deal" rather than risk worse at
trial. The SEC will not enter into a consent decree for penalties
unless the person charged agrees he will not deny committing the
acts of which he has been accused.
Management offers you no reason to believe that consent
decrees result from the SEC filing frivolous cases and coercing
innocent people into consent decrees merely because they cannot
afford to litigate. Could a man in Mr. Galanti's position not
afford to fight a false accusation?
The board should not expect unfettered discretion on how to
deal with inside trading simply because there is a consent decree
rather than a trial.
This shareholder proposal simply asks the Board to find
someone to nominate new to nominate for Mr. Galanti's slot 3 years
from now.
Passage of this proposal will send a strong message to all
insiders at Price/Costco (and elsewhere) that shareholders will not
stand for insiders taking unfair advantage.
2. JUST SAY NO TO GALANTI
There are three board nominees up for reelection this year,
all current executives: Galanti, President Jim Senegal, and
Chairman Jeffrey Brotman.
Price/Costco bought $200,528 worth of apparel in FY 1996 from
a company which Galanti's sister owns and runs.
We feel additional independence is needed on the Price/Costco
board. Four of the board's nine members are current Price/Costco
executives. The 5th is a retired Costco executive now employed by
the company as a consultant ($174,996 in fees in 1996). The 6th
owns a business which consults on the Company's employee insurance
matters, receiving $990,974 in 1996. The 7th is a senior executive
of the managing underwriter of the latest public offering of
Company stock. That leaves only two board members with no ties to
incumbent management. We believe this is too few on a 9-member
board.
We urge you to vote against Galanti. If you wish to use
management's proxy card to express this view, write his name on the
line next to "WITHHOLD AUTHORITY".
VOTING RIGHTS AND PROCEDURES:
If you have already sent in the proxy card you received from
the company, you can still change your vote. A proxy can be revoked
at any time prior to being counted at the meeting simply by filling
out a later proxy card (or by appearing at the meeting to vote, or
delivering the Company secretary written notice of revocation prior
to the meeting.)
Employees owning stock through their 401K Plan have the right
to instruct the plan trustee confidentially on how to vote their
stock, without any fear of management finding out and retaliating.
The Committee will keep all proxy cards and surveys we receive
confidential (except that proxy cards from non-401K shareholders
must be presented to the company's inspector of election at the
meeting for counting).
The enclosed proxy card grants no discretionary authority: if
matters come before the meeting which are not set forth in the
Company's proxy statement or this proxy statement (which we do not
anticipate), we will not vote your shares on those matters.
All holders of common stock as of 12/6/96 record date are
entitled to vote. If you sign the enclosed card but do not direct
us how to vote, we will vote FOR the shareholder proposal and
abstain on all other voting matters. We incorporate herein by
reference the discussion in the Company's proxy statement of the
election of directors, voting requirements and outstanding
securities.
OTHER ITEMS SET FOR A VOTE
Management proposes to: (1) change the company name to Costco
Companies, Inc.; (2) increase the number of shares available for
issuance under the management stock option plan from 10 million to
20 million, and (3) ratify the independent auditors. We take no
position on these issues. We incorporate herein by reference the
discussion of these issues in management's proxy statement.
PROXY SOLICITATION
The Committee consists currently of shareholder Joni Kahn and
Teamsters Local 542. Ms. Kahn began acquiring Price/Costco stock
in 1993 and now beneficially owns 313 shares. She is retired from
Local 542 staff. Local 542 does not own stock in its own name, but
it represents about 1800 Price/Costco employees, and believes most
of its members have invested in the Company's stock through its
401K retirement plan. Other Teamster locals represent approximately
5200 Price employees who also participate in this plan. Proxies
will be sought by mail, fax, telephone and personal interview. The
cost of proxy solicitation, estimated at $2500, will be borne by
Local 542. For proxy solicitation Local 542 will use regular staff,
not specially-engaged solicitors, and may be assisted by other
locals' staff. The locals have collective bargaining agreements
with various Price stores and work to organize others, which
management resists. No strike, contract negotiations, boycott or
picketing is occurring.
PROPOSALS FOR FUTURE MEETINGS
SEC Rule 14a-8 gives shareholders who have owned more than
$1000 worth of the company's stock for more than one year the
right to have the company's proxy statement include a shareholder
proposal and supporting statement. The deadline for submitting such
proposals for inclusion in the proxy statement for the 1997 annual
meeting will be 9/1/97. Feel free to contact us if you would like
more information about shareholder proposals.
EXECUTIVE COMPENSATION/SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS
In 1996, CEO Senegal and Chairman Brotman each received
$450,000 in cash compensation, up from $305,769 each in 1995 (they
received stock options in 1995, none in 1996). CFO Galanti received
$355,000 in cash compensation (up from $277,000) and 80,000 stock
options (up from 20,000). We incorporate herein by reference the
more complete information on these matters in the company proxy
statement.
THANK YOU FOR VOTING FOR THE SHAREHOLDER PROPOSAL AGAINST INSIDER
TRADING
PLEASE RETURN THE ENCLOSED SURVEY AND PROXY CARD TO
Price/Costco Shareholders Committee
c/o Teamsters Local 542
4666 Mission Gorge Place
San Diego CA 92120
Fax (619) 582-0059<PAGE>
<PAGE>
PROXY
SOLICITED BY PRICE/COSTCO SHAREHOLDERS COMMITTEE
for
ANNUAL SHAREHOLDERS MEETING OF
PRICE/COSTCO, INC.
January 29, 1996
The undersigned shareholder hereby appoints Joni Kahn, Norma
DeSaulnier and proxies with full power of substitution to vote for
the undersigned at the Company's annual meeting, and at any
adjournments thereof, on the matters set forth in the Proxy
Statement. The undersigned hereby directs these proxies be voted
in accordance with the instructions herein. Unless marked
otherwise, this proxy will be voted FOR the shareholder proposal
and not voted on any other matter.
(1) ELECTION OF DIRECTORS:
Put a check mark next to each nominee for which you wish to vote:
a. Jim Senegal [ ]
b. Jeffrey Brotman [ ]
c. Richard Galanti [ ]
WITHHOLD from all nominees [ ]
We recommend you do NOT vote for Galanti.
(2) Shareholder Proposal for Zero Tolerance on Insider Trading
FOR [ ] AGAINST [ ] ABSTAIN [ ]
We recommend a vote FOR this proposal.
(3) Company Proposal to Change Name to Costco Companies, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) Company Proposal to Double Amount of Stock Available for Stock
Option Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) Company Proposal to Ratify Auditors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PLEASE DATE, SIGN AND PROMPTLY MAIL.
[ADDED TO CARDS SENT TO INSTITUTIONS:] IF YOU OWN STOCK THROUGH A
STOCKBROKER OR OTHER NOMINEE, DO NOT SEND THIS CARD TO THE
COMMITTEE: INSTEAD, CONTACT YOUR BROKER OR OTHER NOMINEE (STOCK CAN
ONLY BE VOTED BY THE BROKER OR OTHER HOLDER OF RECORD ON THE
PRICE/COSTCO SHAREHOLDERS LIST).
SIGNATURE ________________________________ DATE ___________
PERSONS SIGNING IN REPRESENTATIVE CAPACITY SHOULD INDICATE AS
SUCH. IF SHARES ARE HELD JOINTLY, BOTH OWNERS SHOULD SIGN.
PRINT NAME ________________________________
ADDRESS _____________________________________________________
___________________ ___________ __________________
ACCOUNT NO./SSN # OF SHARES TEL. NO./FAX NO.
<PAGE>
SURVEY OF PRICE/COSTCO SHAREHOLDERS
THIS IS NOT A PROXY: PLEASE RETURN IT EVEN IF YOU DO NOT
FILL OUT A PROXY
1. Do you support the proposal asking that future board nominees
not include anyone who has entered into a SEC insider trading
consent decree?
Yes _____ No ____ Undecided ________
If you wish to vote on this proposal, you need to return a proxy
card or vote at the meeting.
2. Do you support Mr. Galanti's candidacy for the Board of
Directors?
Yes _____ No ____ Undecided ________
If you wish to vote on his candidacy, you need to return a proxy
card or vote at the meeting.
3. List anything you would like management to change about
Price/Costco:
_________________________________
4. List any additional info you would like from the Committee:
_________________________________
THE FOLLOWING INFORMATION WILL BE KEPT CONFIDENTIAL:
Name __________________________________Title, if any __________
Address _______________________________________________________
Phone/Fax ________ # Shares owned ________
Return to: Price/Costco Shareholders Committee, c/o Teamsters Local
542, 4666 Mission Gorge Pl., San Diego CA 92120. Fax (619) 582-
0059.
